A Guide to NHL Salary Arbitration
Shea Weber received a record $7.5 million arbitration award in 2011 (Photo via Yahoo Sports)
One of the most rewarding experiences of my law school tenure was participating in the Hockey Arbitration Competition of Canada, hosted by the University of Toronto Faculty of Law. It was an amazing experience replicating an NHL arbitration proceeding, while also meeting some of the best hockey minds in the world. While I could go on and on about how awesome the competition was, I recommend visiting their website.
I was very fortunate that my law school sponsored my trip to Toronto despite never sending a team to the competition or having anyone on staff that knew much about the NHL’s arbitration procedure. So, I had to start from scratch in learning about this process. Luckily, I had tremendous help from our Sports Law professor and the Hockey Analytics Club at the sports management school. But, I was unable to find a true guide on the arbitration process. So, this is my attempt to give people an understanding of how the NHL's arbitration procedure works.
Eligibility
The current arbitration system we know today was created after the 1994-95 lockout, and is governed by Article 12 of the Collective Bargaining Agreement between the NHL and NHLPA. Thirty players filed for arbitration this off-season.
To be eligible for arbitration, the player must be a Group 2 Restricted Free Agent (RFA). The player must have a specific amount of professional service time in order to qualify as a Group 2 RFA depending on their age. The below chart sets forth the parameters (as seen in Article 10.2 in the CBA):
(Click here for a good explanation of the different Group classifications).
Not only must the player be a Group 2 RFA pursuant to Article 10, he must also fulfill the age and experience requirements per Article 12.1(a) to be eligible for arbitration, as seen in the following chart:
Thus, just because a player is an RFA does not mean that he is also arbitration eligible.
There are some important phrases concerning eligibility that need to be defined. First, “signing age” means the player’s age on September 15 of the calendar year in which he signed the contract (regardless of his real age on the date of the signing). Regarding “professional experience,” for players that are 18 or 19 years old, one year of playing experience means playing at least 10 games in the NHL that season. However, for older players, one year of experience equals playing 10 or more games at any professional level, including "any NHL games played, all minor league and regular season and playoff games and any other professional games played, including but not limited to, games played in any European league or any other league outside North America, by a Player pursuant to his SPC.”
Example
Pittsburgh Penguins forward Conor Sheary was eligible for arbitration this off-season because he signed his first NHL contract in July 2015 when he was 23-years old. He then played 44 NHL games in the 2015-16 season and 61 NHL games in the 2016-17 season to fulfill his two-year experience requirement for arbitration eligibility.
However, Philadelphia Flyers defenseman Shayne Gostisbehere was not arbitration eligible this off-season, even though he participated in four seasons for the Flyers and their AHL affiliate, and was going to be an RFA (per Article 10.2(c), a player that has not accumulated three years of pro experience and has been extended a qualifying offer by the team will become an RFA once their SPC expires). Gostisbehere, the former Union College superstar (you know I had to throw that in there), signed his entry-level deal as a 21-year old in May 2014, meaning he needs three years of professional experience at any pro level to be a Group 2 RFA and eligible for arbitration. While Ghost played in 64 and 76 games with the Flyers in 2015-16 and 2016-17, respectively, he only played in seven pro games in 2014-15 (five in the AHL, two in the NHL) and two pro games in 2013-14 (in the AHL). Thus, while the past two seasons counted as years of "professional experience," the previous two seasons did not count as years of “professional experience” since he did not reach the 10 game threshold in either season. Thus, while technically an RFA, Gostisbehere did not have arbitration rights this off-season.
Electing Arbitration
While many players are eligible for arbitration every off-season, not many go through the arbitration process not only because it’s expensive and time consuming, but also due to its occasionally fierce nature (see Tommy Salo vs. New York Islanders/Mike Milbury; Brendan Morrison v. Vancouver Canucks/Brian Burke). Even though there is a lack of hearings, filing for arbitration can accelerate negotiations.
Arbitration can be elected by either the player or the team. When the player elects arbitration, he (usually through his agent) must notify the Central Registry, NHLPA and team in writing by 5:00pm EST on July 5th.
When the club elects arbitration, there are a few more things to note:
If the player made more than $1,750,000 in the year prior (including bonuses), the team can elect to file for arbitration instead of making a Qualifying Offer (see Section 10.2(ii)). This must be done in writing by June 15 or 48 hours after the Stanley Cup Final has ended. (NOTE: The $1,750,000 amount will be increased yearly at the same percentage rate of annual increase as the Average League Salary).
A team can elect arbitration if the player has not accepted his qualifying offer and if the player has not elected for arbitration. This must be done in writing during the period commencing upon the player’s deadline to select salary arbitration and continuing for 24 hours thereafter.
In team-elected arbitration, the arbitrator cannot award a salary that is less than 85% of the aggregate sum of the player’s salary (including bonuses) in the final year of his most recent contract.
If the team elects arbitration, the team’s offer in the arbitration proceeding must be equal to or greater than the player’s previous salary (including bonuses).
Players are only subject to team-elected arbitration once in their career, even if a hearing did not end up taking place.
A team cannot exercise their right to elect arbitration more than twice per year.
Preparing for the Hearing
The NHL and NHLPA appoint eight arbitrators who are members of the National Academy of Arbitrators to preside over any hearings. The hearings are then scheduled for the last two weeks of July and first week of August. There are still twenty players that have not settled their disputes with hearings set to begin tomorrow, July 20.
Each side must submit a brief to the arbitrator no later than 48-hours before the hearing, outlining their arguments for why the player should receive a specific salary for the upcoming season (or two seasons per Article 12(c)). This part of the process is the most crucial, as this is when each side’s representative accumulates statistics and identifies comparable players to support their argument.
Article 12.9(g)(ii) lists the admissible evidence that can be considered in these hearings, the most important being comparable players. The other forms of admissible evidence include the player’s:
(1) overall performance, including official statistics from previous seasons;
Example: demonstrating improvement/regression/consistency of goals, assists, points, etc. over the years.
(2) number of games played, including injuries and illnesses in previous seasons;
Example: demonstrating a player’s ability to stay healthy for a full season, or showing he’s injury prone.
(3) length of service with the team and NHL;
Example: demonstrating that a player is a veteran or rookie, and if they've been a staple in the team's lineup.
(4) overall contribution to the success or failure of the team in previous seasons; and
Example: demonstrating the player’s contribution to the club by showing he led the team/last on the team in certain statistical categories, as well as statistics in the playoffs.
(5) any special qualities, including leadership and public appeal.
Example: captaincy, charity work, Olympic/World Cup of Hockey experience.
Article 12.9(g)(iii) lists inadmissible evidence, which is most helpful in determining who is eligible as a comparable player. Long story short, in order to be a comparable player, the player being compared to must have been a Group 2 Restricted Free Agent after the conclusion of their “platform season” (the last year of their contract).
It is extremely important (and sometimes difficult) to find players that are very similar to the player heading into arbitration. The best similarities to identify, besides position and points, include age, career games played, and time on ice. Also, the shorter the comparable player's contract the more persuasive it is since arbitration awards are only for a maximum two years, and the more recent the contract the better since $2 million today is not the same as $2 million 10 years ago. Further, it's important that you identify what criteria you used in picking your comparable players.
Example
In 2015, strong comparable players for Marcus Johansson were Nazem Kadri and Michael Frolik. Kadri and and Frolik would have fit the criteria of: (1) +/- 100 career games played; (2) +/- 0.10 career points per game; (3) +/- 0.10 platform points per game; (4) +/- 1 minute platform average time on ice; and (5) between 23 and 25-years old during platform season. It also helped that both of these "comparables" signed one-year deals after their platform seasons where they were Group 2 RFA's. There were other players like Colin Wilson and Craig Smith, who would've also fit this criteria, but they signed four and five year deals, respectively, after their platform seasons. This doesn't mean that they couldn't have been used, they would just be a slightly weaker "comparables" since teams sign guys to long-term deals for different reasons.
The sides must then create “Comparable Exhibits” of the players they are using as comparables, per Article 12.9(v), which look similar to this:
After the hearing, an arbitrator awarded Johansson a one-year, $3.75 million deal. Just note that there was a lot more to this argument than the above comparable players and numbers.
Other types of inadmissible evidence include: qualifying offers made by the team; prior offers and history of negotiations; testimonials, videotapes, newspaper columns, game reports, etc.; any reference to walk-away rights; any award issued by an arbitrator where the team exercised its walk-away rights (see below); financial condition of the team or NHL; references to the team’s upper or lower limit or players’ share; any arbitration award issued in 2005-2006; and any reference to any arbitration award or salary compensation that took place before July 22, 2005.
It should be noted that analytic statistics (aka “fancy stats”) like Corsi and Fenwick are being used more frequently throughout these hearings as analytics becomes more accepted in the hockey community. The key with these statistics is being able to explain how they’re calculated and their importance in evaluating a player since some arbitrators understand analytics better than others.
The Hearing and Decision
Each side has 90 minutes to present its case and may portion its 90 minute allotment between its direct case and rebuttal case however they want (each side gets 105 minutes if appearing before a rookie NHL salary arbitrator).
Whichever side elected arbitration gets to state its case first during the hearing. Once the first side goes, the other side presents their case. Then, each side gets a chance for a rebuttal and closing argument.
The decision of the arbitrator is issued within 48 hours after the hearing. In the written decision, the arbitrator states the term and salary of the award and gives their reasons for decision.
The arbitrator’s decision is binding and final. However, teams have “Walk-Away Rights” when the player elects arbitration. Teams cannot exercise these rights more than once per year (they can exercise this right twice in a year where three or four arbitration awards have been assessed to their players, but this is a very rare occurrence). If the award issued is for one-year and $3.5 million or greater, the team can (within 48 hours) tell the player, NHLPA, and NHL in writing that it does not intend to go forward with the award. Once this is done, the player is considered an Unrestricted Free Agent (UFA). But, if the award is for two years and $3.5 million per year or greater and the team decides to walk-away, the player will enter into a one-year deal for the compensation set by the arbitrator, and the player will be considered a UFA after the season. It should be noted that the $3.5 million threshold will be increased at the same rate as the Average League Salary every season (this year's threshold is $4,084,219).
via CBC Sports
Remember, if you have specific questions regarding this process, please read Article 12 of the CBA (it's about 14 pages long). If you plan on doing your own research on arbitration eligible players, I find Cap Friendly and Hockey Reference to be great resources.
Moving forward, the remaining players I'd be interested in seeing go to a hearing are Conor Sheary, Brian Dumoulin, Viktor Arvidsson, and Tomas Tatar. Perhaps (if I have time) I'll analyze one of these cases soon...